Faucette Corporation has provided the following data concerning manufacturing overhead for January:
$\begin{array}{lrr}
\text { Actual manufacturing overhead incurred } &\$52,000\
\text { Manufacturing overhead applied to Work-in-Process } &\$75,000\
\end{array}$

The company's Cost of Goods Sold was $369,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?
A) Manufacturing overhead was underapplied by $23,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $392,000.
B) Manufacturing overhead was underapplied by $23,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $346,000.
C) Manufacturing overhead was overapplied by $23,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $346,000.
D) Manufacturing overhead was overapplied by $23,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $392,000.

Question

Faucette Corporation has provided the following data concerning manufacturing overhead for January:
$\begin{array}{lrr}
  \text { Actual manufacturing overhead incurred } &\$52,000\
 \text {  Manufacturing overhead applied to Work-in-Process } &\$75,000\
\end{array}$

The company's Cost of Goods Sold was $369,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?
A) Manufacturing overhead was underapplied by $23,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $392,000.
B) Manufacturing overhead was underapplied by $23,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $346,000.
C) Manufacturing overhead was overapplied by $23,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $346,000.
D) Manufacturing overhead was overapplied by $23,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $392,000.

Quizplus · Accepted Answer

Manufacturing overhead was overapplied by $23,000 because the applied overhead ($75,000) is greater than the actual overhead incurred ($52,000). Therefore, the Cost of Goods Sold should be decreased by $23,000, resulting in a final Cost of Goods Sold of $346,000.

Faucette Corporation Has Provided the Following Data Concerning Manufacturing Overhead